Tag Archives: Decision Making

Studying algorithms and how they might be implemented to help us better solve every day problems. Thinking about human cognition and behavior through this computer science lens helps shed light on how we think, why we make the mistakes we make, why and how we have such incredible computational powers, and what rationality really means. We can learn how to make the best decisions given the limited knowledge, time and other resources we have and how to do it with imperfect insights all while dealing with yourself and other messy people. Many problems are intractable but these algorithms will at least give you a jumping off point to begin.

Key Takeaways

Master key algorithm for getting stuff done

Earliest due date and shortest processing time is the master key to determining what to work on and in what order. Work on what has the highest value when importance is divided by completion time. Something must be twice as important if it takes twice as long.

If all you want to do is get through tasks and reduce your to do list, do those things you can accomplish quickest first. There are many algorithms to follow, it all depends on what your goal is and what you want to maximize.

The Optimal Stopping Problem

These cases you should have two phases: a looking phase where you commit for a certain period of time (usually 1/3 of the total amount of time you’re willing to look) and then a leap phase where you take anything that’s better than what you’ve seen during the look phase

If there is some objective criteria you could set, you can then create a threshold and anyone or anything above the threshold should be accepted

Our time horizon or the intervals of which were looking at strongly determine how much we explore and try new things and how much we exploit – going back to well known favorites. Since the interval determines the strategy we can also determine the strategy from the interval. An overload of sure things such as sequels is a good signal of short-termism.

Optimism is the best solution for regret and we should give people, things, and experiences the benefit of the doubt because we don’t know their upper bound – how good they can be – because we don’t have enough information yet. You should be willing to explore when there’s not enough information to make a reasonable conclusion. However, in real life people tend to over-explore and not know when to lean towards the optimal solution. Win – stay, lose – shift

Older people tend to have fewer social connections but that’s because they have refined over decades the type of people they want to spend time with and that naturally seems to decrease over time. This ties together our explore / exploit phenomenon because younger people who have a longer time frame are more on the explore phase and older people with a more finite time frame are in the exploit phase. As you get older and switch from seeking pleasure from exploitation versus exploring, your quality of life will necessarily improve as you are going back to well-known favorites more often

A | B Testing

Tinkering on an extreme scale is done today by some of the world’s largest companies to see what little tweaks between two options can cause. This iteration is done over millions of times per day so that the product/service/experience is ever improving, at least maximizing what is being measured and sought after. You can use this iteration mindset to make small changes and adjustments to your routine, habits, behaviors, thoughts, and see how it impacts you and others over time

Sorting

Fundamental lesson learned about sorting is that scale hurts.

Simply by breaking tasks or projects down into more manageable units can sorting be reduced by multiples.

However, the first question should be whether it needs to be sorted at all. Efficient sorting which is unnecessary is extremely inefficient and sometimes mess and disorder is the optimal solution

Cache

Keeping around pieces of information that you refer to often or anticipate needing shortly at hand so you can quickly retrieve it

Keep things you use often in close physical proximity so that you can get them quickly

It has been found in many different domains that events that have recently happened are more likely to happen in time and the longer it goes without happening the less likely it is to happen again (Lindy Effect)

Over-Fitting

Over fitting is when we try to use too much data too many factors into making our decisions and they not only make things more complex but actually lead to worse predictions and decisions. If there is high uncertainty and unlimited data, paint with a broad stroke and make it simple. Going into the nitty-gritty only hurts you

It’s better to be approximately right then precisely wrong

Other

Procrastination is often associated with laziness but it can simply be that people lose sight of the important things and are racing through their tasks. They have the right strategy for getting things done but it is the wrong metric – favoring the easy over the meaningful

Be aware of context switching costs. Flow and deep work sometimes takes an hour just to warm up and get into the flow and interrupting people or getting interrupted can ruin hours worth of work or more.

There is a constant tension and trade off between throughput and responsiveness. If you’re too responsive you got nothing done and if you’re throughput is all you’re maximizing you’ll never respond to anyone.

Thrashing is the point when your interrupted so often and have so much to do that you get no actual work done and at this point you can step back and reevaluate and often just do whatever you can get done and not worry about the optimal way to do it.

Batching tasks and having set times to do things such as only looking at emails first thing in the morning and at night is a good way to keep from being interrupted too often

You can become better at predicting by knowing if you’re dealing with power laws or normal distributions and the better information you have of course the better guess you can make. That’s why we are quite good at predicting how much longer a person can live for we know the general lifespan of people

Our predictions tell us a lot about who we are because they’re based on our experiences.

If you can’t explain things simply you don’t understand it well enough

If you can’t solve a problem, relax the constraints and try to solve an easier version of the same problem to see if it gives you any clues or jumping off points for how to solve the real problem

Exponential back off is a technique you can use when things fail or you don’t know how to proceed. For example, if people cancel their plans with you last minute wait a week to reschedule. If they cancel again, wait two weeks. Then four, etc…

The first and only rule of hierarchy is that the hierarchy must be preserved

The innovators dream is not a eureka moment but rather a situation that makes you say, “huh, that’s funny.”

Seek games in which honesty is the ultimate policy and then just be yourself – Vickers Auction – where the winning bid pays only the second highest bid price

Sometimes even the optimal strategy will yield bad outcomes which is why you must focus on process over outcome

Sometimes good enough is simply good enough

What I got out of it

Some good techniques and thought processes for how to make better decisions

Bevelin takes quotes and examples from Sherlock Holmes as examples of several tools and techniques to improve thinking and decision making

Key Takeaways

Observation and inference

See things for what they are and report them truthfully

Beware of first impressions – appearances can be deceiving

More is missed by not looking than not knowing

It is not the amount of information that counts by the relevant one

Sometimes it helps to shift perspective

The value of experience is not in seeing much but seeing wisely

“By doing it many times over till it is done perfectly – for it is worth doing.”

Checklist routines for critical factors to help

Look as diligently for what is missing for what is there

Deduction

Reasoning backwards, working back from observations/effects to causes

Use the simplest means first

Analogies

You cannot judge the relevance of an isolated fact. Experience has taught me, and must have taught you, that the most trivial, commonplace and seemingly irrelevant facts have a way of suddenly assuming a crucial importance by connecting, explaining or filling in the detail of later discoveries

That process…starts upon the supposition that when you have eliminated all which is impossible, then whatever remains, however improbable, must be the truth. It may well be that several explanations remain, in which case one tries test after test until one or other of them has a convincing amount of support

Test your theory

If it disagrees with the facts, it is wrong

There is nothing more deceptive than an obvious fact

Patience

Distance gives perspective – sometimes we need to remove ourselves from the problem and get a fresh perspective

Put self in other’s shoes

If we could see the world the way others see it, we easier understand why they do what they do

Don’t make the world fit your tools and use the right tool for the job

Criticize self

Have you tried to find evidence against what you believe? Why might we be wrong? What have we overlooked? What (new) information or evidence is needed to make us change our mind?

When we meet a fact which contradicts a prevailing theory, we must accept the fact and abandon the theory, even when the theory is supported by great names and generally accepted

Learn from mistakes

Update your beliefs in light of new information

For one’s own training it is better to make an incorrect diagnosis than none at all – if you call yourself to account afterwards

Know your limits

Don’t think about how to get things done, instead ask whether they’re worth doing in the first place

A lot of misery comes from what we allow ourselves to get dragged into

What I got out of it

Really good, short read on some key characteristics necessary for deep thinking and better decision making

Our inability to absorb quickly and retain large amounts of information (humans don’t gather enough information to form new models efficiently)

Our tendency to focus on immediately pressing problems (ignore problems our solutions will create, lack of second (12th) order thinking)

Humans ignore causal links and consequences, focusing on short term solutions that implicate the long term effects

Frequent hypothesis testing and critical questioning vital

People tend to regulate the situation and not the decision process

Efficient problem solving revolves around complexity (interconnectedness of different variables), dynamics (autonomously moving) and intransparence (never fully aware of all information, engage in problem with information available to them)

Defining goals is first step in problem solving and then gather appropriate level of information

Convert unclear goals by ranking goals by urgency, viability and probability of success

Must distinguish between delegating and dumping responsibility

Must rank and delegate when we have more than one goal but when we solve one we may create another

Must go beyond just causal relationships but to abstract relationships as well, we must know the hierarchy as well and think in analogies – exploring the unknown via the known

Reductive hypothesis – analyze the final “piece” of a problem and reverse these effects in order to find the true cause of the problem or situation

Strategy is a system of makeshifts, changing as circumstances change

“Good” participants in the game have made considerably less decisions early on and asked many more questions than “bad” participants

Humans terrible at understanding the power of compounding. Don’t be fooled by the term “deceleration” – this is still growth and can compound massively over time!

Laymen and professionals both face distortionary forces in decision and assumption making

Don’t overgeneralize on local experiences. Rather, use sequential hypothesis to continuously ask questions, test and adapt

Must first define goals, then build a model/strategy and then begin filling this model with information until we are comfortable to form a final conclusion

Planning – condition element, action element and result element

Can’t be too unqualified, must take circumstances and exceptions into account (don’t use “always”, “never”, etc.)

We have to study the consequences of our measures in order to find opportunities to correct our incorrect behavioral tendencies and assumptions about reality

Humans are inclined to maintain the illusion of competence by failing to reflect on their decision and problem solving approaches

Often redirect our thinking from actual goals to the goal of preserving a sense of our competence

We cannot teach common sense but we can put ourselves in positions where a clear sense is required, which will help us to develop a common sense for future encounters of a similar kind

What I got out of it

Great book which looks at the fallibilities of our thinking and decision making process and how to improve it

Provides a brief summary of 50 decision models, or mental frameworks, on how to best attack a particular problem or situation. Focuses on better understanding ourselves, others, making the right choices with the information you have, creating effective teams and more.

Key Takeaways

This book is a treasure for those who are looking for new mental models and how to apply them to many difficult/varied scenarios

What I got out of it

Incredible reference for difficult decisions, how to improve yourself, how to improve others, how to create effective teams and more. Website

Family was very smart, hard working and loving. Father taught him power of Tao – love of doing small things excellently

Poker helps with business decisions – when to fold early and when to back heavily

Somewhat arrogant but his opinions are not set in stone

Divorced “Nancy 1” and soon after remarried to “Nancy 2”

Tended to do a task himself or totally delegate it (usually delegated)

Saw advantage of high quality businesses (easy decisions) early on and helped Buffett see the benefit of paying a fair price for high quality businesses

Made first real money in real estate in California

Able to look at facts and come up with new, insightful conclusions

Great at analyzing businesses quickly and saying no if it falls outside his circle of competence

Can zero in on what is truly important

Must think correctly AND independently

To become truly wealthy, need ownership in a business

Simply easier to be ethical, rational and honest. Hard work and honesty gets you almost anything

If Charlie trusts someone, he trusts them completely

Blue Chip float lead to purchases in See’s Candy, Precision Steel

Typically make one major decision every 3 years. Extreme patience with extreme decisiveness

Must only deal with quality people

Want to be in sectors that tend towards natural monopolies

Bought Buffalo Evening News in 1977. At the time was nearly 25% of BRK net worth

Foresaw savings and loan debacle and moved Wesco away from thrift

“Our experience in shifting from savings and loan operation to ownership of Freddie Mac shares tends to confirm a long-held notion that being prepared, on a few occasions in a lifetime, to act promptly in scale, in doing simply and logical things, will often dramatically improve the financial results of that lifetime…A few major opportunities clearly recognizable as such, will usually come to one who continuously searches and waits, with a curious mind, loving diagnosis involving multiple variables. And then all that is required is a willingness to bet heavily when the odds are extremely favorable, using resources available as a result of prudence and patience in the past.”

Remember the obvious rather than grasping the esoteric

“Most geniuses—especially those who lead others—prosper not by deconstructing intricate complexities but by exploiting unrecognized simplicities.” — Andy Benoit

“Our rule is pure opportunism”

Look for integrity, intelligence, experience and dedication. Look to create the best business environment anywhere through evaluations without extensive meetings, capital access, focused compensation, and freedom to do one’s best

Don’t confuse simplicity with ease

“People underrate the importance of a few simple big ideas. And I think to the extent Berkshire Hathaway is a didactic enterprise teaching the right systems of thought, the chief lesson is that a few big ideas really work. I think these filters of ours have worked pretty well because they are so simple.”

In the mid ’90s, BRK transitioned to owning more companies outright and became the buyer of first resort

Munger admires Costco so much he violated his rule and joined their Board

Avoid the mistake of not buying great, undervalued businesses when the stock has appreciated

Tell the truth, tell it fully, tell it fast

Giving time, talent, risking reputation as important as contributing money

Many people specialize too early. Must deeply learn subjects you can’t live well without (psychology, math, physics, engineering)

Paranoid self pity, the “victim mindset” is the most destructive frame of mind

Every time you think about someone or something ruining your life, it’s in fact just you

A few really big ideas carry most of the weight

“To those whom much is given, much is expected. Always live below your financial means so that you will have money to invest. Invest in such a way so as to avoid the possibility of falling into a negative position – primarily, by limiting the amount of debt you use…If you want to get smart, the question you have to keep asking is “why, why, why?” And you have to relate the answers to a structure of deep theory. You’ve got to know the main theories. And it’s mildly laborious, but it’s also a lot of fun…From physics, Munger has learned to solve a problem by seeking the simplest, most direct answer. The easiest way invariably is the best way. From mathematics Munger learned to turn problems upside down or to look at them backward – invert, always invert.”

If he taught finance, would look at about 100 companies who have thrived or failed

Take a simple, basic idea and take it very seriously

Truth is hard to assimilate in any mind when opposed by interest

5 best practices for thinking, problem solving, decision making

Simplify by answering the big “no brainer” questions first

Gain numerical fluency

Invert problems

Must use elementary and multidisciplinary thinking

Lollapalooza effects come only from a combination of a large number of factors

Pilot training should be implemented into different fields

Formal education wide enough to cover practically everything useful

Wide base of knowledge raised to practical fluency

Ability to think forwards and backwards (concentrate on what you want to avoid as much as what you want to happen)

“How do successful thinkers think? And how is it that their ways of thinking make it more likely that they will succeed than fail in the cauldron of business and life…? In this book we set out to isolate a few of the key mechanisms in the minds of successful thinkers – mechanisms that seem to account for enormous differences in individual outcomes. We attempt to describe those mechanisms precisely enough that readers will see how they themselves can absorb and develop them.”

Key Takeaways

Ask not “what” you / others think but rather “how” do they think

Can’t directly observe thinking so have to look at what people say and do and then ask “how do you think and how does that lead to your actions, success?”

How people speak and how they act a direct window into their thought process

Successful thinking integrates several radically different models while preserving the thinker’s ability to act decisively. Able to quickly and effectively abstract the best qualities of radically different ways of seeing and representing; in doing so, that person develops ‘a better lens’ on the bewildering phenomenon we call the ‘world’

Diamind = dialectical mind = a mind that beholds at least two often contradictory ways of seeing the world, gives each its full due, and instead of fearing and fleeing the resulting tension, lives it, embraces it, and comes up with a better way – one that does violence to neither but improves on both

Like most behavior, thinking is tainable and habitual

Mental habits are procedures that have been engineered for specific purposes; they are unconscious and natural. Understanding this is one key to mental habit detection, creation and procreation

Making things explicit is a great learning tool

Behavior does not have to be conscious to be intelligent – most diaminds don’t know how they think

Thinking can be thought of as communication between present and future you

Ask “what does my mind (not “I”) want to do with the world?” Give distance between self and mind is important

Suppressing thoughts doesn’t work as you have to first think of what you are trying to suppress in order to suppress it

Behavior becomes more intelligent, more adaptive, in proportion to the inclusiveness of the predictive model you have built from the situation at hand

Integration requires an integrator – a powerful, versatile model of the situation that can explain, contain and comfortably accomodate the various impulses you feel. It also requires a will to weather the discomfort of this larger model in order to bring about the integration question. The integrator’s skill set can be traced back to a set of habitual ways of being, of habits of mind

Small but frequent things (dense things) like thoughts and interactions will quickly compound with small changes

Beware human’s inborn tendency to prefer simple explanations

Brain as software – imagine you can program people’s actions through the inputs you feed it. What input (smile, smirk, praise, etc.) do you have to feed in order to elicit a desired response

People suck at doubting but is what Taleb specializes in. Diamind realizes this and cultivates doubting skills as there are unknowns everywhere

Truth does not equal certainty. Problems arise when one needs to be certain of a truth

Diaminds live out their beliefs, act on and take responsibility for their predictions. Actually have skin in the game

3 central dogmas of today’s age – people are rational, cause and effect have a linear relationship and things fall into a normal (Gaussian) distribution

Mind is like a fishnet and world an ocean – have to believe something in order to see it (what you catch)

Inner diversity is key – many mental models, see same problem in many different ways

Replace as many statements of fact as you can with statements that highlight the dependence of the facts on the underlying theories and mechanisms that must be valid in order for the statement of fact to make sense

Inverse thinking

Look upon the present as if it were the past. Then look back and by eliminating all the paths you could not have taken, figure out how you must have travelled from the presnt to the future

Diaminds have audacity – the ability to make the abductive leap that takes one to imagine a desired state of the world that is implausible or even inconceivable right now, to take seriously the notion that this implausible state of the world is real and then work to bring about the conditions that will supply the best explanation as to how it came about. Talk about the future as if it were the past

The perception a fact is valid (a bluff) is often as powerful as the truth

Writing promotes deep thinking; lists obscure it

Effective self-talk is like storytelling, it is a narrative

Diaminds able to successfully navigate complex world through good mental habits – think/see/do

Recording yourself having a conversation can be helpful as speaking is a window to how you think

“Mentalese” – language specific to thinking and problem solving

Types of problems – simple vs. hard (initial and desired conditions clearly defined and there is a definite process as to how to achieve it; hard problems may be clear but you can’t see your way to the solution before actually solving the problem)

Tame vs. Wicked – tame have been proven over time to be solvable in some way, wicked problems are problems whose initial and desired conditions are subject to change as a function of the very process by which you’re trying to solve them

Sowell argues that knowledge is man’s most severe restraint but knowing the power of incentives, who the decision maker is, and a couple other key elements helps making decisions at least a little easier

Key Takeaways

Humans’ most severe restraint is knowledge but still must make important decisions

Sowell examines evolution of decision-making processes and how it spreads between different areas

No person or group is likely to have sufficient knowledge to make a perfect decisions the first time around

There is an independent reality through which each individual perceives only imperfectly, but which can be understood more fully with feedback that can validate or invalidate what was initially believed

Ideas are everywhere but knowledge is rare

Civilization an enormous device for economizing on knowledge. As people live closer together, ideas and their adoption spread much quicker

Need to consider not only how much we know but how well we know it

How decisively we act depends on how certain we are of the consequences

Must understand who the primary decision maker is, with what incentives they are working with as well as constraints, feedback mechanisms

Must understand the decision-making process and its costs

Most basic of all decisions is who shall decide

Most basic inherent restraints are time and wisdom

Every item / decision has both a time price and a monetary price – this is its real cost

Incentives not only affect decisions but the type of people drawn to certain decision making roles

What I got out of it

A little disappointed but definitely has some good nuggets. Judge people / companies on process / results over their lofty, stated goals; power of incentives, constraints and feedback mechanisms; understanding who the decision maker is is very important; real cost include time price and money price

Best leaders move seamlessly through 4 quadrants – I, IT (short-term), IT (long-term), WE

Few leaders think about how they think, their weaknesses, brand, leaderships qualities and therefore have little self-awareness

Maturity is key to be a great leader – differentiation between knowledge and wisdom

True leaders aim to strip away illusions and see deeper realities – able to integrate knowledge and wisdom, more holistic view, no preconceived answers, continuously try to flush out hidden assumptions

Relationships tend to fail because of either poor communication or low levels of trust

Effective communication has two basic aspects – transmission and reception

3 levels of communication -what people say, what people think or feel and most deeply, what people mean

Making others feel heard is extremely motivating

Trust givers trust people automatically where trust earners must make others prove themselves first

TRUST – taking responsibility for understanding other people’s traits

Internal coherence lays foundation for extraordinary performance and also to develop deeper and longer lasting relationships (ultimate prize in life

Leaders must be able to transform their personal leadership qualities, real development and the corporate culture

When hiring, look at what the business needs and if necessary, bring someone in and train them rather than trying to fit the role to the person

Use MAP to get at the true meaning of what people say. Move attention to body and breathe, appreciate the speaker, play back the underlying meaning

Watkins is the founder of Holacracy – Tony Hsieh recently implemented at Zappos

Clarify purpose; clarify all decision making forums; define limit of authority; define reporting process, establish clear accountability; create new roles; assign new accountabilities to new roles; establish new policies or changes to existing policies; define ways of working within teams

What I got out of it

Being self-aware is absolutely vital and focusing on the different areas (physiology, emotion, cognitive, maturity, values / Behavior, networks, impact) is key. Must be healthy before can focus on emotions, cognition…

In the long run, acute successful randomness fools will run out of luck and after years of success will have one devastating quarter where they lose everything in one huge blow up

Induction – infer things about the nature of the world based on our observations. This approach leads to problems as one disconfirming piece of evidence (one black swan) makes the long held belief that all swans are white incorrect

Can never be sure any theory is correct. Always consider the possibility that your theories and assumptions may be proved wrong and examine how such a development would affect your portfolio

The past blowups were always surprises, as all future ones will be as well. Just because it hasn’t happened before, doesn’t mean that it won’t

Path dependent outcome – things sometimes end up as is because of luck or randomness (QWERTY), not because it is optimal

Going the extra mile is disproportionately rewarded but without visible progress, most people give up before they succeed

Human brain not built to accurately forecast or think about probabilities

People get attached to things they already own but we should be able to accept change in our minds when presented with enough evidence

Capability for rational reason can easily be overwhelmed by emotions

We are inherently poor at understanding the impact of rare events

The opposite but more enduring trading strategy is betting on rare, unlikely events with a big payoff should they occur. Although a market crash might be unlikely, it can still be worth betting on it if the possible reward in such an event is large enough

If we are to be fooled by randomness, make it the best kind and work to your advantage

In the face of randomness, act as stoics would – no self-pity, show personal elegance, don’t blame others and don’t complain